[Federal Register Volume 60, Number 18 (Friday, January 27, 1995)]
[Rules and Regulations]
[Pages 5333-5336]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1948]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 24
[PP Docket No. 93-253; DA 95-19]
Implementation of Section 309(j) of the Communications Act--
Competitive Bidding
AGENCY: Federal Communications Commission.
ACTION: Final rule; correction.
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SUMMARY: This document contains corrections to the final regulations,
which were published December 7, 1994 (59 FR 63210). The regulations
related to the broadband PCS auction rules.
EFFECTIVE DATE: February 6, 1995.
FOR FURTHER INFORMATION CONTACT:
Sue McNeil (202) 418-0620.
SUPPLEMENTARY INFORMATION:
Background
The final regulations that are the subject of these corrections set
forth rules which are designed to ensure that small businesses, rural
telephone companies and businesses owned by [[Page 5334]] minorities
and women have the opportunity to compete for and obtain licenses for
broadband personal communications services (broadband PCS) and to
attract the investment capital needed to have meaningful involvement in
building and managing this nation's broadband PCS infrastructure.
Need for Correction
As published, the final regulations contain errors which may prove
to be misleading and are in need of clarification.
Correction of Publication
Accordingly, the publication on December 7, 1994 of the final
regulations, which were the subject of PP Docket No. 93-253, is
corrected as follows:
1. Paragraph 64 of the text on page 63221, col. 1 is corrected to
read as follows:
64. Specifically, we will retain the 25 percent minimum equity
requirement for the control group, but we will require only 15 percent
(i.e., 60 percent of the control group's 25 percent equity holdings) to
be held by qualifying, controlling principals in the control group
(i.e., minorities, women or small/entrepreneurial business
principals).\35\ For example, if the applicant seeks minority or women-
owned status, the 15 percent equity, as well as 50.1 percent of the
voting stock of the control group and all of its general partnership
interests, must be owned by control group members who are minorities
and/or women. If the applicant seeks small business status, 15 percent
of the equity, as well as 50.1 percent of the control group's voting
stock and all of its general partnership interests, must be held by
control group members who, in the aggregate, qualify as a small
business.\35\a With regard to establishing control of the
applicant by qualified investors, where the control group is composed
of both qualifying and nonqualifying members, the qualifying members in
the control group must have 50.1 percent of the voting stock and all
general partnership interests within the control group, and maintain de
facto control of the control group. The control group, in turn, must
hold 50.1 percent of the voting stock and all general partnership
interests of the PCS applicant. Thus, qualifying members of the control
group will have de jure and de facto control of both the control group
and, indirectly, the applicant. The composition of the principals of
the control group and their legal and active control of the applicant
determines whether the applicant qualifies for bidding credits,
installment payments and reduced upfront payments. The 15 percent
minimum equity amount may be held in the form of options, provided
these options are exercisable at any time, solely at the holder's
discretion, and at an exercise price equal to or less than the current
market valuation of the underlying shares at the time of short-form
filing. The remaining 10 percent (i.e., 40 percent of the control
group's minimum equity holdings) may be held in the form of either
stock options or shares, and we will allow certain investors that are
not minorities, women, small businesses, or entrepreneurs to hold
interests in such shares or options. Specifically, we will allow the 10
percent portion to be held in the form of shares or options by
qualifying investors or by any of the following entities which may not
comply with the entrepreneurs' block requirements (e.g. investors who
are not minorities or women or investors, and/or their affiliates, that
exceed the entrepreneurs' block or small business size thresholds): (1)
individuals who are members of an applicant's management team; (2)
existing investors of businesses in the control group that were
operating and earning revenues for two years prior to December 31,
1994; or (3) noncontrolling institutional investors.\35\b
\35\See Media Communications Partners ex parte comments, filed
Oct. 11, 1994, at 7-8.
\35\aFor instance, if a pre-existing company wants to
qualify as a small business control group, its gross revenues and
total assets will be added to the gross revenues and assets of each
of its controlling shareholders and to those of all affiliates. The
resulting sum must be under $40 million in gross revenues and $500
million in total assets. The gross revenues and total assets of the
company's pre-existing, noncontrolling shareholders will be ignored,
however.
\35\bSee note 162 infra (explaining definition of
institutional investors).
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2. Paragraph 65 of the text on page 63221, col. 2 is corrected to
read as follows:
65. As discussed supra at paragraph 59, the Commission also adopted
an alternative to the 25 percent minimum equity requirement for
minority and women-owned businesses, which permits a single investor to
hold as much as 49.9 percent of its equity, provided the control group
holds at least 50.1 percent. Several petitioners have expressed similar
concerns with respect to the need to revise the 50.1 percent
requirement.35c Therefore, in tandem with, and for the same
reasons as, the modifications to the 25 percent equity requirement, we
make similar modifications to the rules governing the 50.1 percent
minimum equity requirement. Accordingly, where a minority or women-
owned business uses the 50.1 percent minimum equity option, we will
require only 30 percent of the total equity to be held by the
principals of the control group that are minorities or women. The 30
percent may be held in the form of options, provided these options are
exercisable at any time, solely at the holder's discretion, and at an
exercise price equal to or less than the current market valuation of
the underlying shares at the time of short-form filing. The remaining
20.1 percent may be made up of shares and/or options held by investors
that are not women or minorities under similar criteria described in
paragraph 64 above. That is, the 20.1 percent portion of the control
group's equity may be held in the form of shares or stock options by
qualifying investors or by any of the following entities which may not
comply with the entrepreneurs' block requirements (e.g. investors who
are not minorities or women or investors, and/or their affiliates, that
exceed the entrepreneurs' block or small business size thresholds): (1)
individuals who are members of an applicant's management team; (2)
existing investors of businesses in the control group that were
operating and earning revenues for two years prior to December 31,
1994; or (3) noncontrolling institutional investors.\36\
\35c\See, e.g., BET Petition at 16; Columbia PCS Petition at 2-
3; Omnipoint Petition at 9.
\36\For our purposes, we define institutional investors in a
manner that is similar to the definition that is used by the
Commission in the attribution rules applied to assess compliance
with the broadcast multiple ownership rules. We modify that
definition slightly, however, to fit this service. Specifically, we
expect that investment companies will be important sources of
capital formation for designated entities. Accordingly, we adopt a
definition that specifically includes venture capital firms and
other smaller investment companies that may not be included in the
definition of investment companies found in 15 U.S.C. 80a-3 (which
is cited in our broadcast rules at 47 CFR Sec. 73.3555 Note 2(c)).
Specifically, we define an institutional investor as an insurance
company, a bank holding stock in trust accounts through its trust
department, or an investment company as defined under 15 U.S.C. 80a-
3(a). We include in the definition any entity that would otherwise
meet the definition of investment company under 15 U.S.C. 80a-3(a),
but is excluded by the exemptions set forth in 15 U.S.C. 80A-3(b)
and (c) and we do so without regard to whether the entity is an
issue of securities. However, if the investment company is owned, in
whole or in part, by other entities, the investment company, other
entities and affiliates of other entities, taken as a whole, must be
primarily engaged in the business of investing, reinvesting or
trading in securities or in distributing or providing investment
management services for securities, See Section
24.720(h). [[Page 5335]]
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Sec. 24.709 [Corrected]
3. Section 24.709(b)(5)(i) (B) and (C) on page 63233, col. 2 are
corrected to read as follows:
* * * * *
(b) * * *
(5) * * *
(i) * * *
(B) Such qualifying investors must hold 50.1 percent of the voting
stock and all general partnership interests within the control group,
and must have de facto control of the control group and of the
applicant;
(C) The remaining 10 percent of the applicant's (or licensee's)
total equity may be owned by qualifying investors, either
unconditionally or in the form of stock options not subject to the
restrictions of paragraph (b)(5)(i)(A) of this section, or by any of
the following entities, which may not comply with Sec. 24.720(n)(1):
(1) Institutional investors, either unconditionally or in the form
of stock options;
(2) Noncontrolling existing investors in any preexisting entity
that is a member of the control group, either unconditionally or in the
form of stock options; or
(3) Individuals that are members of the applicant's (or licenses's)
management, either unconditionally or in the form of stock options.
* * * * *
Sec. 24.709 [Corrected]
4. Section 24. 709(b)(6)(i) (B) and (C), on page 63233, col. 3 are
corrected to read as follows:
* * * * *
(b) * * *
(6) * * *
(i) * * *
(B) Such qualifying minority and/or women investors must hold 50.1
percent of the voting stock and all general partnership interests
within the control group and must have de facto control of the control
group and of the applicant;
(C) The remaining 20.1 percent of the applicant's (or licensee's)
total equity may be owned by qualifying investors, either
unconditionally or in the form of stock options not subject to the
restrictions of paragraph (b)(5)(i)(A) of this section, or by any of
the following entities, which may not comply with Sec. 24.720(n)(1):
(1) Institutional investors, either unconditionally or in the form
of stock options;
(2) Noncontrolling existing investors in any preexisting entity
that is a member of the control group, either unconditionally or in the
form of stock options; or
(3) Individuals that are members of the applicant's (or licensee's)
management, either unconditionally or in the form of stock options.
* * * * *
Sec. 24.711 [Corrected]
5. Sections 24.711(b)(1) and 24.711(b)(2), on page 63235, col. 2
are corrected to read as follows:
* * * * *
(b) * * *
(1) For an eligible licensee with gross revenues exceeding $75
million (calculated in accordance with Sec. 24.709 (a)(2) and (b)) in
each of the two preceding years (calculated in accordance with
Sec. 24.720(f)), interest shall be imposed based on the rate for ten-
year U.S. Treasury obligations applicable on the date the license is
granted, plus 3.5 percent; payments shall include both principal and
interest amortized over the term of the license.
(2) For an eligible licensee with gross revenues not exceeding $75
million (calculated in accordance with Sec. 24.709 (a)(2) and (b)) in
each of the two preceding years, interest shall be imposed based on the
rate of ten-year U.S. Treasury obligations applicable on the date the
license is granted, plus 2.5 percent; payments shall include interest
only for the first year and payments of interest and principal
amortized over the remaining nine years of the license term.
* * * * * *
Sec. 24.712 [Corrected]
6. Sections 24.712(d)(1) and 24.712(d)(2), on page 63235. col. 3,
and page 63236, col. 1, are corrected to read as follows:
* * * * * *
(d) * * *
(1) If during the term of the initial license grant (see
Sec. 24.15), a licensee that utilize a bidding credit under this
section seeks to assign or transfer control of its license to an entity
not meeting the eligibility standards for bidding credits or seeks to
make any other change in ownership that would result in the licensee no
longer qualifying for bidding credits under this section, the licensee
must seek Commission approval and reimburse the government for the
amount of the bidding credit as a condition of the approval of such
assignment, transfer or other ownership change.
(2) If during the term of the initial license grant (see
Sec. 24.15), a licensee that utilizes a bidding credit under this
section seeks to assign or transfer control of its license to an entity
meeting the eligibility standards for lower bidding credits or seeks to
make any other change in ownership that would result in the licensee
qualifying for a lower bidding credit under this section, the licensee
must seek Commission approval and reimburse the government for the
difference between the amount of the bidding credit obtained by the
licensee and the bidding credit for which the assignee, transferee or
licensee is eligible under this section as a condition of the approval
of such assignment, transfer or other ownership change.
Sec. 24.720 [Corrected]
7. Section 24.720 (f) and (h), on page 63236, col. 2 and col. 3,
are corrected to read as follows:
* * * * *
(f) Gross Revenues. Gross revenues shall mean all income received
by an entity, whether earned or passive, before any deductions are made
for costs of doing business (e.g. cost of goods sold), as evidenced by
audited financial statements for the relevant number of calendar years
preceding January 1, 1994, or, if audited, financial statements were
not prepared on a calendar-year basis, for the most recently completed
fiscal years preceding the filing of the applicant's short-form
application (Form 175). For short-form applications filed after
December 31, 1995, gross revenues shall be evidenced by audited
financial statements for the preceding relevant number of calendar or
fiscal years. If an entity was not in existence for all or part of the
relevant period, gross revenues shall be evidenced by the audited
financial statements of the entity's predecessor-in-interest or, if
there is no identifiable predecessor-in-interest, unaudited financial
statements certified by the applicant as accurate.
* * * * *
(h) Institutional Investor. An institutional investor is an
insurance company, a bank holding stock in trust accounts through its
trust department, or an investment company as defined in 15 U.S.C. 80a-
3(a), including within such definition any entity that would otherwise
meet the definition of investment company under 15 U.S.C. 80a-3(a) but
is excluded by the exemptions set forth in 15 U.S.C. 80a-3 (b) and (c),
without regard to whether such entity is an issuer of securities;
provided that, if such investment company is owned, in whole or in
part, by other entities, such investment company, such other entities
and the affiliates of such other entities, taken as a whole, must be
primarily engaged in the business of investing, reinvesting or trading
in securities or in distributing or [[Page 5336]] providing investment
management services for securities.
* * * * *
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 95-1948 Filed 1-26-95; 8:45 am]
BILLING CODE 6712-01-M
